- The EUR/USD is stabilizing around 1.1640 as traders await a speech from Powell on Friday.
- Expectations for Fed rate cuts are mixed: the CPI raised hopes for a 50 basis points reduction, while a rise in the PPI kept some anticipating a 25 basis points cut or no change at all.
- Trump is urging a meeting between Zelensky and Putin, pushing for progress in peace negotiations.
The EUR/USD is expected to remain stable during the North American session, particularly as developments regarding the Ukraine-Russia conflict unfold ahead of a speech by the Federal Reserve Chair at Jackson Hole. The pair is currently trading at approximately 1.1640, down by 0.12% as of now.
On Tuesday, the US released housing data, which investors largely overlooked. Last week’s inflation figures, both consumer and producer, caused varied responses in terms of anticipated rate cuts from the Fed.
Initially, following the Consumer Price Index (CPI) release, some traders were anticipating a reduction of 50 basis points. However, the rise in the producer price index (PPI) altered that view, leading most markets to now reflect expectations of a 25 basis points cut, with some speculating that the Fed may choose not to adjust rates at all.
Chairman Powell’s upcoming speech might clarify the interest rate trajectory into the latter half of 2025.
On another note, positive news regarding potential resolutions of conflicts between Ukraine and Russia could strengthen the euro. Meanwhile, US President Trump is advocating for a meeting between Zelensky and Putin to address their differences and foster peace.
Upcoming EU inflation figures, along with the HCOB Flash PMI for August and German GDP statistics, are anticipated to emerge soon.
Daily Digest Market Mover: EUR/USD could rise if the dollar strengthens
- The recovery of the US dollar is hindering the euro’s advance. The dollar index, measuring its performance against a range of currencies, has seen an increase of 0.14% to 98.27.
- The direction of the EUR/USD is influenced by demand for safe-haven assets and discrepancies in monetary policies of the Fed and the European Central Bank (ECB). Anticipation remains high at around 86% for a Fed rate cut in September, while expectations are that the ECB will maintain its current rates, with a mere 8% chance of a 25 basis point reduction.
- US economic data presented mixed signals regarding housing for July. Housing starts were projected to rise by 5.2%, increasing from 1.31 million to 1.428 million; conversely, building permits dropped from 1.393 million to 1.354 million, indicating potential weaknesses in future construction.
Euro Technical Outlook: EUR/USD dips below 1.1700, sellers eyeing 1.1600
The EUR/USD seems to have hit a peak, recently reaching a low of 1.1646 in the past three days, signaling a loss of momentum from buyers. While the relative strength index (RSI) remains bullish, it’s nearing the neutral line, suggesting that sellers could soon take over.
If the EUR/USD rebounds past 1.1700, the next resistance levels to watch would be the high of 1.1788 from July 24, the psychological level of 1.1800, and the annual peak at 1.1829. On the other hand, if it falls below the confluence of the 50-day and 20-day Simple Moving Averages at around 1.1639/27, that could lead to a drop towards 1.1600 before reaching the 100-day SMA at 1.1460.
